Crossbred wool prices continue to disappoint, with no positive news feeding back out of the supply chain. The failure of crossbred wool prices to recover from the 2020 plunge, at the onset of the pandemic, has been unusual amongst the general apparel fibre complex. With this in mind we look at the relationship between crossbred and manmade fibres this week.

Apparel fibre prices plunged at the onset of the pandemic in early to mid-2020. Crossbred wool prices have followed a different path to apparel fibres generally since then, by remaining at depressed levels with no recovery as of yet.

Figure 1 shows a long run series for 30 micron, in US dollar terms in order to show the cycles and trends without the moderation caused by the Australian dollar, from early 1970 to this month. Overlaid on the graph is the ratio of the 30 micron price to a polyester staple fibre (PSF) price series. This schematic covers five decades, during which the apparel fibre markets have changed with manmade fibres becoming the dominant fibre group. In the early 1970s manmade fibre prices were completing their steep descent in real prices, which had put enormous pressure on natural fibre prices during the 1960s. From the early 1970s onwards the rate of decrease in price for manmade fibres slowed as their cumulative volume of historical production grew. The price ratio shown in the early 1970s is low because the PSF price was still falling from high levels and wool prices were depressed.

In Figure 1 we can see that the price ratio for 30 micron to PSF is around two, and has been for the past year. The 30 micron price is effectively double that of PSF. This ratio has generally been the low point since the mid-1970s, with the exception of early 1991 when prices briefly collapsed to a ratio of one (parity with PSF) when auctions recommenced after the failure of the Reserve Price Scheme.

Figure 1 shows the current 30 micron price level to be on par with low levels of the past five decades when looked at in relation to the ratio to PSF prices. In recent decades the ratio has spent periods of one to two years at this level (longer in the early 1980s). It has been there for a year now, so it is conceivable we will have to wait until the economic cycle turns upwards in 12-18 months time for the next best opportunity for crossbred prices to pick up.

Figure 2 shows a similar comparison for 27 micron and acrylic staple fibre (ASF) prices from the late 1980s onwards. This price ratio is not as tidy as that shown in Figure 1, but it shows a ratio around 1.5 has generally been the low for 27 micron and acrylic, which is where it is now and has been since late 2021.

What does it mean?

The crossbred wool to manmade fibre price ratios show that the current low prices are still within the parameters of past markets. Unfortunately the low price ratios do not provide any hint of timing with regards to recovery in crossbred wool prices. They do tell us that there remains some downside risk if oil prices fall with manmade fibre prices easing as a consequence. In such a scenario, if the price ratios held then crossbred prices would follow manmade fibres lower.

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Key Points

  • The price ratio for 30 micron and polyester staple fibre has been around two for the past year, which has generally been its low level since the mid-1970s.
  • For 27 micron, its price ratio to acrylic is around 1.5 which has been its low level for the past three decades.

Click on figure to expand

Click on figure to expand

Data sources: PCI Fibres, Emerging Textiles, BAE, AWC, WI, AWEX, RBA, ICS

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